- Crude oil rebounds to $73 over Russia, Saudi output cut talks
Ejiofor Alike in Lagos and Chineme Okafor in Abuja with agency report
Nigeria’s oil production is set for a timely boost, climbing to around 2.2 million barrels per day (mbd) by early 2019 with the start-up of the giant 200,000 barrels per day (bd) Egina field, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said.
This is coming as crude oil rebounded to $73 per barrel wednesday after falling to its lowest since August, supported by a report that Russia and Saudi Arabia are discussing oil output cuts in 2019.
Speaking on Tuesday in an interview with S&P Global Platts on the side-lines of the Africa Oil Week conference in Cape Town, South Africa, Kachikwu acknowledged that there have been delays in the planned revamp of the four petroleum refineries owned by the Nigerian National Petroleum Corporation (NNPC) in Kaduna, Warri and Port Harcourt.
He said he was hopeful that the federal government would unveil details of the overhaul of the refineries by the end of this year, after which work could commence by early 2019.
“Egina should come into production in December or may be January…Hopefully, that should lift us closer to 2.15 million-2.2 million by the start of next year barring any unforeseen shutdowns,” said Kachikwu in the interview THISDAY obtained in Abuja.
While the country has reportedly not seen any major new oil projects in the last five years, the $16 billion Egina deep-water project by Total is seen to be pivotal to Nigeria’s production increment plans.
The project is at the moment the biggest oil and gas investment in Nigeria and will boost the country’s crude production by over 10 per cent.
Kachikwu, however, said foreign investment in the country’s oil industry had improved and was “reasonably good.”
He further noted that production could rise by a further 200,000 to 400,000bpd over the next few years, “if we get the right sort of financial investments that are required.”
According to him, “longer term it (the target) is around 2.5mbd and I think you could see it creep up to 3mbd in the next eight to 10 years.”
The minister said the Bonga Southwest and Zabazaba projects were the two upstream investments that could propel oil production further.
In April, records from the NNPC indicated Nigeria’s oil output was around 1.8mbd of oil and condensate.
The country’s output slumped to around 1.1mbd in 2016 due to attacks on its key oil infrastructure in the oil-rich Niger Delta.
But Kachikwu said in the interview that oil output was just below 2mbd with crude accounting for around 1.6mbd and condensate comprising some 400,000bpd.
On the refineries’ revamp, he said, “before the end of the year, we should see a sign-off and actually physical construction and works could start early-2019,” while acknowledging that the process had been beset by delays.
The NNPC had two weeks ago stated that it was in talks with prospective financiers to carry out the repair of the refineries in an attempt to substantially increase local supply of petroleum products and as well end importation of same.
The refineries revamp plan involves securing financiers’ money to fund the refineries’ repairs, with the investors reimbursed through the off-take of refined products from the plants.
The minister equally spoke on the oil market rebalancing efforts of the Organisation of Petroleum Exporting Countries (OPEC) ahead of their December meeting in Vienna. He said he did not think the OPEC and its allies would change their current output strategy despite recent suggestions they may need to tweak the policy.
“I do not think there is a need for any action unless we fully know the impact from Iran. I think there is too much of an alarm. My advice to OPEC is always to be careful of these alarms…I do not believe a big change will be taken at the next meeting.”
Kachikwu said OPEC was very comfortable with oil prices nearer to $70 per barrel, despite the sharp drop in prices from above $80 per barrel a few weeks ago.
Oil Price Rebounds to $73 P/B
Meanwhile, oil rebounded to $73 per barrel yesterday after falling to its lowest since August, supported by a report that Russia and Saudi Arabia are discussing oil output cuts in 2019.
Russia’s TASS news agency, citing an unnamed source, reported that the two countries, the biggest producers in an OPEC-led alliance that has been limiting supply since 2017, have started bilateral talks on the issue.
Brent crude, the global benchmark, rose 91 cents to $73.04 a barrel after hitting $71.18 on Tuesday, its lowest since August 16. US crude rose 58 cents to $62.79.
While Iranian oil exports are expected to fall because of US sanctions that took effect on Monday, reports from OPEC and other forecasters have indicated that the global market could see a 2019 supply surplus as demand slows.
Reuters reported that a ministerial committee of some OPEC members and allies, including Russia and Saudi Arabia, is due to meet on Sunday in Abu Dhabi to discuss the market and outlook for 2019.
Any return to limiting supply would follow a June decision by the OPEC-led group to relax output curbs in place since 2017, after pressure from U.S. President Donald Trump to cool prices and make up for losses from Iran.
Supply from countries such as Saudi Arabia has risen sharply since June. In addition, having initially talked of cutting Iranian oil shipments to zero, Washington gave waivers to eight customers, raising the prospect of more Iranian oil in the market than expected.